For Millennials, It's Apps More than Acceleration

By Dale Buss February 23, 2011

Millenial apps.jpg

Joe McFarlane just moved from Cincinnati to Detroit to become part of the cutting edge of automotive marketing: selling to the newest buyer segment, Millennials. The  Procter & Gamble executive signed on as General Motors’ point man for appealing to the 75 million Americans who were born between 1977 and 1998.

“He’s a senior-level guy, an incredible young marketing mind, who we hired away from P&G, and his entire job is to crack this nut and answer how we market to Millennials,” said Joel Ewanick, GM’s global chief marketing officer. “And we are so knee-deep in this. We’re having lots of meetings, and we’re working with some really cool companies to help us with this. It’s a huge initiative for us.”

Indeed, there can be no bigger long-term priority for the auto industry in the United States than figuring out the preferences of Millennials, a powerhouse demographic cohort — also known as Generation Y, and Echo Boomers — which is about the size of the previous most populous: their parents, the baby boomers. Because Millennials represent such a huge portion of the potential car-buying American public for the next few decades, manufacturers must successfully address their needs, wants and turnoffs to convert today’s nascent recovery into solid long-term growth.

“They’re hugely significant in terms of raw numbers alone,” said Sage Marie, Honda’s manager of product planning in the U.S. “Capturing their business and ensuring their loyalty is crucial for the future.”

Breaking the Mold
Millennials also have proved to be the first generation to defy the auto-industry marketing wisdom of at least half a century. Now of driving ages from 16 to 33, Millennials tend to be less interested in driving per se or in the traditional attributes of automobiles, especially power, and more interested in the environmental credibility of vehicles and in their emergence as rolling platforms for owners’ cell phones, iPods and other infotainment devices. “They’re less inclined to get a driver’s license as soon as they can,” said Larry Dominique, Nissan’s vice president of advanced and product planning in the U.S. “They’re looking at vehicles more from a practical than an emotional sense.”

Millennials are marked by other differences from preceding generations, too. “They may end up worse than the previous generation from a net-worth standpoint,” noted George Rogers, president and CEO of Team Detroit, Ford’s advertising consortium. “And they’re more socially concerned, about the environmental aspects of vehicles.”

Here are some of the ways Millennials are compelling and confounding auto companies:

Technology First
The entire society is adjusting to Millennials’ fierce devotion to electronic connectedness, and automakers are trying to come up with a role for their vehicles that will accommodate the generation’s priority -- and certainly not thwart it. “They’re connected before they get in their car, and when they get in their car, they’re worried that all of that has to be put on hold until they get where they’re going and they can get reconnected,” Marie said. “So it’s incumbent upon us to make sure the car integrates seamlessly with their lives so their lives don’t get put on hold when they get into the car.”

Sync Applink.jpgRichard Wallace said that “what they’re looking for is different.” The director of transportation systems analysis for the Center for Automotive Research explained that boomers “may have haggled over the engine. But [Millennials] are more interested in, ‘Can I link this to the internet, and use this kind of screen, and bring my music in and have it play through the system?’”

As Dominique put it, “As smartphones get smarter and people’s lives all end up on these tiny devices, they’re wanting to just hop into the car with this phone and have it communicate with everything.”

The priority placed by Millennials on infotainment already has sent automakers scrambling to please them over the last several years. And the manufacturers that are doing the best job so far are reaping rewards in the marketplace. The best example is Ford. The company stole a march when it introduced Sync a few years ago, along with Microsoft, because they designed the feature as a flexible interface to support whatever mobile devices are brought into the car -- rather than as an attempt to impose a hard-wired platform on the driver, as was the basic approach behind General Motors’ OnStar system.

As a result, consumer “take” rates for Sync are at least two out of three even in small models such as Focus and Fusion, whose reasonable price points reflect their status as somewhat basic transportation. And Ford’s biggest gain in market share over the last two years has been among Millennials, said George Pipas, the company’s head of U.S. industry analysis.

Other automakers are scrambling to catch up. GM just announced the launch of Chevrolet MyLink, a Sync-like system, beginning with the Volt later this year. And Kia is introducing a voice-controlled infotainment system called UVO (stands for “Your Voice”), based on technology the Korean brand developed with Microsoft after the exclusive Sync partnership between Ford and Microsoft expired. “They’ll be able to bring in PDAs, USBs, iPods or whatever, and control it all through voice commands,” said Michael Sprague, head of U.S. marketing for Hyundai.

Power Outage
The notion of “Little Deuce Coupe” becoming a hit song with Millennials today, as it was for their boomer parents in 1963, is laughable, because their relationship to and with cars is very different. “They care about infotainment technology more, and the thing they care about less is that whole culture of gasoline and horsepower,” Rogers said. Eric Wong, a manager in Mazda’s product planning and strategy group, said that “there’s less emphasis on straight-line speed and horsepower, and it’s more cool to get a car that is more fuel-efficient.”

Styling remains important to Millennials, and there’s a huge customization trend among young buyers that bespeaks their interest in parts of the automobile other than the UBS port. “Customization up and down the line is key to winning over this generation, and it’s not just a matter of connectivity,” Wallace noted.

But another aspect of Millennials is they’re less involved emotionally with the very notion of a vehicle. This trend is advanced in Japan, said Nissan’s Dominique. “The United States is not anywhere near that, and it will be a long time before we are,” he said. “But there are signs that we are chipping away at the emotional side of cars.” Marketing of Nissan’s Leaf is an example of the trend: Leaf has an emotional appeal to Millennials, but mainly because of its extreme environmental friendliness. And Nissan has been promoting an onboard telematics system that, among other things, continually updates the driver on the Leaf’s remaining battery range and on the closest charging stations.

Nevertheless, said Honda’s Marie, Millennials “want a vehicle that is fun and expresses their personality. In some ways, they’re the same as previous groups of young car buyers.” Overall, said Eric Wong, a manager in Mazda’s product planning and strategy group, “We still believe that there is ‘zoom-zoom’ in how Millennials connect with their vehicles and that it can be delivered in how they drive their cars and how they’re emotionally connected.”

Drivers Wanted
Millennials demonstrate less raw enthusiasm for driving than any generation since the popularization of the automobile. The notion of camping out in the parking lot of their local Department of Motor Vehicles office on the eve of their sixteenth birthday, as many of their parents did, is alien to most in the new generation. Several tendencies of Millennials feed this trend.

First is the impatience they can demonstrate with the auto-industry new-product cycle because of how they’ve been spoiled by quick turnover in consumer electronics. “With a phone, they replace it every year,” Wallace said. “What are their reactions when they have to spend so much more on a car and then are expected to keep it for six to eight years and then trade it in?”

Millennials’ resistance to the technological obsolescence of vehicles is behind the bet that some aftermarket companies are placing. Parrot, for instance, has introduced a line of aftermarket connectivity kits. “There are around 50 million used cars that don’t have connectivity,” said Christian Coly, a vice president of Southfield, Mich.-based Parrot. The company’s $299 kits “can be a real differentiator for dealers.” Another factor in Millennials’ relative lack of appreciation for cars and driving is that, "teens are able to connect in so many other ways” than physically, Honda’s Marie noted -- especially through their mobile phones..

Millenial Sarah.jpgYet, because friends tend to be important to them, Millennials spend a lot of time in vehicles as passengers, not as drivers. “They tend to travel in packs,” Sprague said. This trend has even prompted some American municipalities to pass ordinances regulating how many pre-adult individuals can be in a vehicle. And as generations of young people before them, adult Millennials tend to cluster in big cities, where mass transport is usually available. Also, they are entirely comfortable with an innovation newly available with their generation: car-sharing services such as Zipcar.

Yet, as Rogers noted, “There’s an emotional aspect to vehicles, of freedom and just getting out and escaping, and that continues to be a fundamental magnet for vehicle purchase.” And, he added, “in most metro areas of this country, public transportation remains an inexact science. There remains a real, pragmatic need for vehicles. We’re all just trying to figure out, ‘What is the definition of a vehicle in their lives today?’ ”

Marketing Mindset
Of course, Millennials must be approached differently when it comes to the experience of marketing and selling autos as well. For one thing, their primary orientation is becoming social media. “Introducing new vehicle through Facebook is the new test drive,” argued Liz Vanzura, chief marketing officer of MMB Advertising, Boston, and Cadillac’s former CMO.

Kia is addressings this in part by using about two dozen different icons at the end of its TV commercials, which quickly communicate to graphics-savvy Millennials the features of the vehicle, such as a panoramic sunroof. “That communicates to them something about the vehicle better and more quickly than a voiceover,” Sprague said. “They see icons and know what they mean because that’s the world they live in.”

But Millennials’ fresh orientation also extends into the purchasing experience. Fiat, for example, may steal a march on better-established competitors in how it approaches this issue. Not only is the company unconcerned about the fact that the Fiat brand failed in the United States 35 years ago – Millennials weren’t even alive then – but also Fiat is tilting its retail approach toward this burgeoning generation. Fiat wants Chrysler dealers who sell the new Fiat 500 to use no-haggle pricing.

“This generation just despises the concept of going to haggle with a dealer,” said Wallace, who is based in Ann Arbor, Mich. “They ask, ‘Why isn’t the price just on’ the car?” Ewanick said that GM now is focusing heavily on the fact that Millennials “are looking for a different kind of shopping experience,” without getting more specific.

Spoiled – or Despoiled?
This is the generation that is staying at home with their parents longer than any Americans before them, including many who have personal incomes of as much as $100,000 a year. That is illustrated by the fact that one of the most popular provisions of the “Obamacare” health-care legislation passed in 2010 was parents could keep their offspring who lived at home on their health-insurance policies until age 26.

“I’m a boomer, and we grew up in a generation where when you turned anywhere from 18 to 21 years old, your dad kicked you in the butt and said you were out on your own,” Dominique said. “But boomers’ relationship to their own children is very different — much closer — so parents aren’t in a hurry to have Millennials move out.” The new generation “grew up with computers and minivans and iPods, and they also grew up wanting nothing — because they had everything.”

For automakers, this trend creates uncertainties. “It’s influencing vehicle-purchase behavior because a lot of Millennials are saying, ‘I don’t have to buy a fancy car or one I’m attracted to emotionally, because I can always borrow Mom and Dad’s.’ ”

Yet Millennials face unique economic challenges: Economists roundly assert they are the first generation of Americans who cannot count on their collective economic achievements exceeding those of their parents. For one thing, the current unemployment rate among Millennials is about twice the national average of 9 percent, financially disadvantaging vast ranks of this cohort just as many of them are reaching the traditional age of first car purchases. “They’re almost all of driving age by now, but a lot of them still aren’t in the (automobile) market because of the economic conditions,” Honda’s Marie said.

Millennials’ “ability to start moving forward economically has been retarded,” Dominique said. “Their purchasing power may be extremely big later, but they’re not following the growth timeline that boomers or Gen Xers followed. So there are a lot of open questions. One of them is, if they’re delaying leaving home for financial reasons, are they leaving home when they do with a lot of money in the bank? We’re not sure yet.”

Yet, automakers that address this reality may resonate with Millennials. “They’ve been deeply impacted by the recession and by what’s happened to their parents,” Kia’s Sprague said. “For us as a value brand, we should be well-positioned with them in the long term as long as we continue to offer great value.”

Distraction Dilemma
Millennials may be the most technologically attuned generation of Americans yet, but the growing establishment of driver-distraction laws is pretty squarely aimed at frustrating their sometimes-disturbing behavior behind the wheel.

“They’re probably more willing to be distracted than other drivers,” Dominique said. “They don’t want to be constrained. So we’ll have to make the car’s technology architecture more flexible.” For example, he said, automakers are working on voice-recognition technology that is effective “with more casual conversation” with the driver.

At the moment, this dilemma is vividly illustrated by the differing approaches that automakers are taking to whether to allow social-media interaction on their infotainment systems. So far, for example, Ford has said no to allowing Sync users to, for example, update their Facebook status while driving. On the other hand, GM has famously taken the opposite tack, as in its Super Bowl commercial in which a Millennial Chevy driver got a voice-converted message via Facebook indicating that he was a hit within a minute or two of leaving his date at her front door.

Ford’s Connelly that “we’ll see ‘do-not-disturb’ buttons around the driver. But we’ve had people say that, if given the choice between not being connected in a car or being connected somewhere else, they’ll take the train or subway or bus. That’s more important to them.”

Team Detroit's Rogers says he believes that “with all these sensors around a car, we’re eventually going to have one that drives itself. You’re going to be able to do a lot more in the car than people think. So, to Millennials, we need to provide a much more relevant experience for them — so that we can keep the vehicle as a must-have in their lives.”

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veryhrm says: 2:03 AM, 02.26.11

I find this article because it communicates what these car companies are thinking and where they're putting their money. On the other hand, what these people are saying seems... well... kind of stupid.

Gen Y are a very important marketing demographic to market to because:
- they don't care about cars
- they live in cities and take the bus
- they live in cities and use zip car
- they live at home and use their parents' cars
- they are unemployed and and don't have money to buy a car
- they are passengers (and thus don't buy cars)

So you're going to design cars for people who don't buy them, don't want them and don't care about them, except in as much as they can connect to their phones. Oh yeah... sounds like a winning strategy!

Also, speaking of triumphs of marketing... what's this about ? "Marketing of Nissan’s Leaf is an example: This is a vehicle big on practicality because of its electric powertrain..."

I like the nissan leaf. it's innovative ... it's ground braking ... it's quiet ... it's clean... it's many things... but whatever marginal practicality it has is not BECAUSE of its electric powertrain but rather IN SPITE OF its electric powertrain!

which is more reasonable: "The nissan leaf is practical because it is limited to 100 miles range in any 8 hour period" or "The nissan leaf is practical EVEN THOUGH it's limited to 100 miles range in any 8 hour period" ?

"the Leaf is practical because you have to install a charging station at your house" or "the leaf is practical even though you have to install a charging station at your house"

"The Leaf is practical because you have to plug it in when you get home" vs "The Leaf is practical even though you have to plug it in when you get home"

alistair010 says: 2:52 PM, 03.02.11

Mobile apps are all the rage for mobile users. From the user side -- and the dealership side -- mobile apps utilize a communication channel that really hasn't been tapped until the past few years.

With the advent of QR codes and text campaigns, dealerships are seeing the benefits of using it for service specials, car sales and much more.

Couple that with a good social media campaign and things can get really rolling.


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